Find Your Next Compounder

Not all growth is quality growth.

• A company may be growing its revenue, but not its free cash flow (i.e. top line growth, but no bottom line growth).
• A company may be growing its free cash flow, but have low returns on capital (i.e. growth is dependent on increasing amounts of debt).
• A company may be growing its free cash flow by investing at high returns on capital, but lack the resilience to competition and economic cycles to ensure that growth can continue into the future (i.e. highly cyclical and no competitive advantages).
• A company may be highly resilient, but be operating in a declining market, meaning there’s uncertainty as to whether growth will continue (i.e. weak market economics).

A quality growth company grows both its revenue and its free cash flow, it does so by reinvesting profits at high returns on capital and has the pricing power, resilience and the market to continue growing for years to come. Such companies represent only a tiny segment of the equity market. This is where the Long Equity focuses.

The Long Equity research framework follows a concentrated quality growth methodology focusing on value-creating and price-setting global companies. Our framework only tracks companies that can: (i) invest their capital at significantly higher returns than their cost of capital (value creation); and (ii) raise their prices without impacting demand (price setting).

Our aim is to research and analyse what works and what doesn’t work in business performance, providing a systematic research framework built on studying proven business models.

• Quality: We track companies that demonstrate the ability to maintain consistently high returns on capital. To assess resilience, we study companies insulated from interest rates, inflation, competition and geopolitics, favouring essential B2B services over discretionary consumer goods.
• Growth: We look for companies that consistently grow their free cash flow per share – through sales expansion, pricing power, operational leverage, and share buy-backs. Growth should be non-volatile over the long-term, diversified, insulated from economic cycles, and not dependent on excessive leverage.
• Value: We maintain a watchlist of companies that meet our threshold for quality and growth. We analyse valuation by comparing forecast future free cash flow per share in 3-5 years with current market prices to estimate forward FCF yield.
• Concentration: Our educational model portfolio tracks 10-14 companies to illustrate a disciplined quality compounder framework, with illustrative weightings between 4-16% to model risk distribution.

Our research focuses on avoiding discretionary consumer products and cyclical businesses. Instead, we analyse predictable free cash flow growth from businesses providing mission-critical B2B services, including payment networks, semiconductors, enterprise software (SaaS), financial data providers, and specialised healthcare.

We evaluate risk through business quality and balance sheet durability rather than financial engineering. We focus research on companies with strong moats, conservative leverage, and resilient recurring revenue, while avoiding speculative turnarounds, unproven business models, and volatile commodity-exposed sectors.

To examine diversification, our tracking spans diverse global business drivers across enterprise software, payment rails, credit rating infrastructure, and life sciences.

We analyse earnings that represent a high return on capital, predictable growth drivers, low cyclicality, high cash conversion, and low financial leverage.

We evaluate company valuation by comparing forecast normalised free cash flow per share with current market prices (the forward FCF yield) and benchmark against quality peers.